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Innovative New Arrangement Set to Yield Significant Windfall for Litigation Partners

Posted by Michelle Barron on 24th April, 2019 in Opinion and categorised in
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We’re reaching out to inform you about an interesting new venture we are involved in, one that we believe could be of interest to your firm.

Burcher Jennings has been assisting legal funding organisation, Doorway Capital to develop a new innovative form of funding, marking a shift in the way firms gain access to capital.

So, what is the new approach?

We recognise that a significant element of partners’ capital seems to be forever tied up in paid disbursements. Now for the first time ever, law firms with litigation practices have the opportunity to sell their disbursement books outright, to Doorway.

Litigation practices have often made payments of disbursements on behalf of clients, and although a number of lenders have long provided law firms with loans secured over disbursements, these have usually been at very high interest rates.

As caseloads have grown and outlay on items such as court fees have risen, the financial strain has also increased, limiting the amount of capital available for essential investment and, in some cases, requiring injections of capital from partners or from an external lender.

How does it work?

Doorway has already begun to purchase disbursements from law firms, freeing up funds that can either be invested in more profitable pursuits, or returned to equity partners. So, it’s not a loan that has to be repaid: you sell paid disbursements to Doorway Capital under a simple sale and purchase agreement.

Depending on the age and composition of your underlying disbursements, Doorway expects to pay up to 80% of their value today, and even continue to buying from you those disbursements you generate in the future.

How will my firm benefit?

The underlying rationale behind this new approach is directly tied to the return you make on paid disbursements. By financing paid disbursements through an outright sale, rather than keeping them on the balance sheet, your firm can invest that capital elsewhere.

Whether it’s taking on new instructions, employing more staff, or returning it back to the equity partners, gaining back access to those funds means your firm can focus on the things that really matter - profitability and growth of the business.

Can you give me an example?

A firm has a book of £2 million in unpaid disbursements

If approved, the disbursements are assigned to Doorway who immediately pay £1.6m to the firm

The firm reinvests the £1.6m in taking on and resourcing new matters (ie. growing the business)

Doorway gets paid 100% of the disbursement when the law firm receives it, but does not assume risk of nonpayment if cases fail. The law firm has the responsibility of paying Doorway. If the case is lost, the ATE policy should pay.

How do I take part?

If you’re as excited about this opportunity as we are, we’d be thrilled to talk to you further. Whether it’s dropping by your office with Doorway Capital, or a quick chat over the phone, we’re happy to answer any of your questions.